Health savings accounts (HSAs) have become extremely popular in the past decade. According to key findings of a Devenir Research study, HSA accounts exceeded 25 million in a recent year, holding $53.8 billion in assets. HSAs are popular with employees enrolled in Qualified High Deductible Health Plans (HDHPs) because they allow them to pay for out-of-pocket healthcare expenses for themselves and their families with tax-free dollars. A frequently asked question from health savings account holders is what services are eligible to be paid with HSA funds.
What Exactly Is An HSA?
Health savings accounts are tax-advantaged medical savings accounts available to people enrolled in HDHPs. These accounts are owned by the individual. If not spent, HSA funds roll over and accumulate year over year, with the ability to earn tax-free interest. These funds can be used to pay for qualified medical expenses at any time with no federal tax liability.
What Expenses Can You Pay For From Your HSA?
HSAs are designed to cover IRS-qualified, out-of-pocket medical expenses, many of which are not typically covered by health insurance plans. These expenses include:
- Deductibles
- Co-insurance
- Prescription medications
- Dental care
- Vision care
A complete list of IRS-qualified medical expenses, over-the-counter medications, and services are available at hsabank.com. This list includes items you might not expect, such as acupuncture, birth control, vasectomies, breast pumps and lactation supplies, medical alert bracelets, smoking cessation programs, massage for specific ailments, weight-loss programs for particular diseases, and guide dogs.
Eligible Dependent Care Expenses
In addition to medical expenses, you can cover certain dependent care expenses with your health savings account. Eligible dependent care expenses include:
- Babysitting services
- Au pair services
- Nursery schools
- Pre-kindergarten
- Before and after-school care programs
- Summer day camps
- Custodial or elder in-home care expenses
- Adult daycare
What Types Of Expenses Are Ineligible For HSA Reimbursement?
Some services and expenses are not eligible to be paid for with HSA funds. These include:
- Aromatherapy
- Breast enhancement
- Hair re-growth services and supplies
- Baby supplies, such as bottles, cups, baby oil, and wipes
- Skincare and cosmetics
- Shampoo and conditioner
- Health club memberships
- Deodorant, dental floss, cotton swabs, etc.
How Do You Pay For Qualified Medical Expenses From Your HSA?
You can use a debit card to pay for IRS-qualified medical expenses with HSA funds. You can also pay for qualified expenses out-of-pocket, and reimburse yourself at a later time with funds from your HSA. You have point-of-sale access to HSA funds, and access at ATMs for withdrawals, with a signature or PIN. Daily limits are $5,000 at doctors, hospitals, and other merchants dedicated to healthcare, and $3,500 at merchants such as department stores that are not healthcare specific but offer medical products or services.
How Much Can You Contribute To A Health Savings Account?
In 2019, the maximum yearly contribution to an HSA is $3,500 for individual plans and $7,000 for family plans. In 2020, these limits increased to $3,550 for individual plans and $7,100 for family plans. People age 55 and older are allowed to make an additional $1,000 catch-up contributions to their health savings accounts.